People first!

by Lyndon H. LaRouche, Jr.

October 4, 1998

Very soon, the doomed, present international
financial system will disintegrate. It can not be managed,
or repaired; its doom is certain, and soon. We are already
in the final phase of its destruction. This destruction
will occur either in a rational way, through merciful,
pre-emptive actions by individual governments, or in the
most tragic way, spontaneously, and chaotically. Either
way, the present financial system is doomed to disappear,
very soon.

Under these circumstances, the continued existence of
the U.S.A., as of other nations, depends absolutely upon
the alacrity with which the government responds with
certain required, immediate measures of emergency action.

If the measures specified here are taken, this nation
will assuredly survive the crisis, and that most
successfully. If the political will to adopt and implement
such emergency measures, immediately, is lacking, the
nation will be torn apart by the chaos caused by its
stubborn refusal to change the present system. If the
present posture of clinging to the self-doomed dogmas of
"free trade" and "globalization" is not overturned, chaos
is already inevitable; in that case, this nation will not
survive in a recognizable form.

The following are exemplary required measures.

1.0 General emergency policy

When that disintegration of the world's present
financial system occurs, the U.S. and other governments,
if they are sane, will each consider themselves obliged to
take certain, instant, autonomously sovereign, and drastic
emergency actions. The immediate purpose of these actions,
is to maintain the social stability and general welfare of
the nation and its entire population. The rule governing
these actions, is: "People first! All the people!"

Using the case of the U.S.A. itself as the example,
the case can be stated as follows.

These measures are of four general classes: (a)
Emergency measures to ensure immediate and continuing
social security, according to the general imperative of
the Preamble of the 1789 U.S. Constitution; (b) Emergency
measures of general financial and monetary reorganization,
measures designed to facilitate the measures designed to
ensure general social security; (c) Emergency measures of
economic recovery, to maintain and expand the levels of
physical-economic output of the national economy, both per
capita and per square kilometer; (d) International
measures required for this same purpose.

2.0 Emergency measures of social security

2.1. These actions will give absolute priority to the
continuity of the essential functions of government
itself, but will also give equal priority to maintaining
the continuing function of all essential elements of basic
economic infrastructure, agricultural operations,
manufacturing and closely related operations, and the
physical distribution and commerce in those goods and
services essential to maintaining the life of persons and
households. Enabling action expressed in such legal forms
as emergency laws and decrees, will be needed for this
purpose.

2.2. These actions must not merely maintain
infrastructure, agriculture, manufacturing, household, and
related essential physical-economic activity at levels
existing prior to the "crash." Immediate steps must be
taken, chiefly by initiative of government, to increase
the levels of useful output from these categories of
activities, this at the expense of forms of services which
are not essential to the health of the physical economy
and its population. For the case of the U.S.A. itself,
these actions will be taken with an eye to the methods of
emergency action taken under President Franklin Roosevelt,
for the period for World War II.

2.3. Some special, supplementary actions must be
taken. These will include a moratorium on financial
foreclosures of home-owned residences and closely related,
functional essentials of private ownership. This must be
complemented by absolute protection of the bank deposits
of individuals, up to a specified, modest amount per
capita. Similarly, basic health-care programs must be
funded to similar effect. The general rule for such and
related measures, is to leave the household and small
business affairs of the individuals and families at the
discretion of the individuals, as much as possible,
freeing decisions within this area from the burdensome and
complex details otherwise demanded of governmental
interference, as much as possible.

3.0 General financial reorganization

3.1. The U.S.A., like most nations of the world
presently, and most globalized financial institutions, is
already hopelessly bankrupt financially. It is not
necessary to wait, to see if the bank collapses, to know,
already, that this is so. Only desperately wishful fools
would deny that to be a fact.

3.2. As in any bankruptcy of a major, once stable
economic enterprise, the bankruptcy did not come all at
once, but occurred through the cumulative effect of
wrongheaded policies, each piled on top of one another,
over a long period of time. In the case of the U.S.A.
itself, a period of not less than thirty-odd years.
Fortunately, the set of principles on which the U.S.
economy, in particular, was operating prior to thirty-odd
years ago, was predominantly sound in effect. That being
the case, we must reorganize the U.S. economy as we would
act to bring any essentially sound economic enterprise
back to healthful life, by reorganization in bankruptcy.

3.3. The actions to be taken initially, are to
eliminate the bad management and the bad policies of
practice, and to write off that portion of the total
amount of putative present financial obligations, the
which must be written off, if the enterprise is to resume
the degree of healthy growth it enjoyed status quo
ante--prior to thirty-odd years ago.

3.4. In the case of the bankruptcy of the financial
system of a sovereign nation-state, there are special
rules to be considered, differing from those which might
be appropriate to any institution other than a
nation-state. Fortunately, in an earlier period the U.S.
as a whole was bankrupt, 1787-1789, those implicitly
constitutional considerations have already been addressed,
principally by U.S. Treasury Secretary Alexander
Hamilton's three reports to the U.S. Congress, on the
subjects of national credit, a national bank, and
manufactures. These rules apply not only as the relevant
U.S. precedents, but serve as a model of reference for
other sovereign republics.

Although we must give due consideration to debts and
assets defined in terms of differing media, the central
point of reference for the financial, monetary, and
related policies of the U.S. government, especially under
conditions such as these, is the sovereign currency of the
U.S. government, which can be nothing other than U.S.
Currency-Notes issued according to constitutionally
prescribed procedures for this. For reasons stated by
Secretary Hamilton, that form of currency, and other forms
of debt directly incurred as U.S. Debt (rather than other
Federal Reserve debt), constitute the primary, absolute
obligations of the U.S. government in face of a general
financial bankruptcy of the nation, such as that now
extant. The "full faith and credit" of the U.S.'s currency
and sovereign debt, must be defended, as the premise for
the credit-mechanisms employed in coming out of the end of
the present international financial system. The role of
U.S. currency, on this account, is not limited to the case
of the U.S.A. itself; the special importance of the U.S.
dollar is global, still today.

The central principled issue of financial
reorganization, is that the defense and deployment of
those forms of U.S. sovereign debt, are the financial
mechanisms of credit-creation, through which the U.S. real
economy shall be revived from its present degenerated,
torpid condition.

3.5. With one additional provision, let paper values
otherwise, fall as low as they please. "It is only paper,
after all." If a bank's net worth is less than zero, we
may choose to support its continued functioning, because
the sovereign U.S. requires that such a bank exist for the
needs of the citizens and economy of that locality. The
protection of modest financial and other assets of
individuals, households, and certain varieties of
enterprises which are defined as essential in
physical-economic terms, follows from the same general
principle.

3.6. The object is to expand the physical-economic
activity and productivity of the economy and of the
population as a whole, such that the economy is meeting
the needs of the entire population, and also operating
above physical-economic break-even levels. To this
purpose, U.S. national credit must be supplied, through
national-banking methods, radiating through participating
private banks, into the relevant enterprises of the
nation's government and private sector, as we built up
what became the prosperous U.S. economy of the 1950s and
early 1960s, from the deep economic-depression levels
supplied by Andrew Mellon's policies of the 1920s and
early 1930s.

Our nation has done this in the past, has known how
to do that in the past, and can apply those lessons to
doing the same, or better, once again.

4.0 Economic recovery measures

During 1861-1876, again during the economic
mobilization of 1914-1917, and during 1933-1945, the U.S.
used a combination of large-scale infrastructure-building
and science-driver programs in technological progress,
with effects whose successes astonished the world of those
periods. The leading priorities in organizing a long-term
period of successful, global economic reconstruction, are
the following.

4.1. Basic economic infrastructure: principally
water-management and general sanitation; mass
transportation of freight and passengers; power, with
emphasis upon increasing energy-flux density and coherence
of primary sources; basic urban infrastructure as such;
and, national and international mass systems of education,
science, and health-care. Large-scale, long-term
investment in these improvements in basic economic
infrastructure, supply the foundation upon which the
potential for real economic growth depends.

4.2. Fostering employment of operatives in basic
agricultural and industrial production, with emphasis upon
those increases in the productive physical-economic powers
of labor which are realized solely through emphasis upon
increased rates and levels of per-capita investment in
capital-intensive, power-intensive modes of scientific and
technological progress.

4.3. Increasing the role of the machine-tool-design
sector of production as a percentile of total labor-force
employment, and the development of these capabilities to
ever higher international standards, and with greater
density of efficient delivery into national economies and
the localities of those economies.

4.4. Integrating the educational, fundamental
research, and machine-tool-design functions of the world's
and national economies around science-driver programs,
including the aggressive exploration and colonization of
nearby portions of our Solar System.

Generations have passed since a very nasty fellow,
Harvard Professor William James, wrote of "the moral
equivalent" of war. The only true moral equivalent of war,
is to mobilize for development of the world's economy, to
the benefit of each and all nations of the planet, and to
do this in a way we have never mobilized before, except
for purposes of war. That, in summary, is the task, the
policy which sane governments will adopt now.